Steel imports into Nepal over Jan-Aug’21 rose a substantial 40% to 1.52 million tonnes (mn t) compared to 1.09 mn t seen in the same eight months of CY’20, as per Customs data maintained with SteelMint.
Imports were also up m-o-m but a more modest 9% to 0.17 million tonnes (mn t) in Aug’21 against 0.15 mn t seen in Jul’21.
India remains highest exporter
India remained the highest exporter of steel items to neighbouring Nepal for the period under review across both CY’21 and CY’20.
In fact, India’s exports to this neighbouring country comprised almost 96% of the total volume in Jan-Aug’21 at 1.46 mn t. In Jan-Aug’20, India remained the highest exporter with 1.07 mn t.
Nepal imports most of its steel from India because of the geographical proximity.
Infra focus raising steel demand
Nepal’s focus is reconstruction after the 2015 earthquake and the construction industry is currently contributing around 10% to the country’s GDP. Several infrastructure and power transmission and distribution projects are coming up big time, whipping up demand for steel, especially long products.
Consequently, imports of semi-finished were at 0.88 mn t in Jan-Aug’21 while finished longs were at 0.21 mn t and finished flats at 0.43 mn t.
In Aug’21, imports of billets were at 0.10 mn t, longs at 45,154 tonnes and flats, at 20,523 tonnes, up 20%, 6% and down 9% respectively m-o-m.
Nepal’s rising sponge iron imports
Nepal’s sponge iron imports grew to 160,000 tonnes (t) in CY’20 from 140,000 t in CY’19. Keeping that in mind, lot of new players, (around 11) are setting up furnaces, this will certainly increase the demand of sponge iron in the country. Nepal’s new government has recently downsized the budget brought in by the earlier government, making drastic changes related to taxation in steel products manufactured in the domestic market as well imports. In a significant move, govt has removed the duty on sponge iron import which was earlier set at 5%.
Outlook
Nepal is poised to see an increase in steel demand, with more than 20 infrastructure projects of national importance relating to construction of hydropower plants, logistics corridors, airports, roads etc coming up. However, only 40-45% capacity is being utilised by the mills. The present challenge is that demand for steel for the last 4-5 has not gone beyond 1.5 mn t while capacity is around 5 mn t. Power tariffs are steep and demand for power can go up with the setting up of new mills, especially the backward integrated sponge iron mills. However, Indian exporters feel oversupply or overcapacities are not a challenge. Rather, an opportunity. With container freights and logistics costs going up, importing steel from India is a viable option for Nepal importers, they feel.
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